Orissa HC Rules No GST on Electricity Transmission and Distribution Charges

Riverside Utilities Pvt Ltd Vs Union of India and others (Orissa High Court)

In the case of Riverside Utilities Pvt Ltd Vs Union of India and others, the Orissa High Court addressed a legal challenge concerning the applicability of Goods and Services Tax (GST) on electricity transmission and distribution charges. The petitioner, represented by Mr. Jena, is a distribution company contesting a circular dated March 1, 2018, issued by the Central Board of Excise and Customs under the Ministry of Finance. The circular contained a clarification that specified certain fees and charges related to electricity transmission were subject to GST, which the petitioner argued should instead be exempt based on previous judicial rulings. Mr. Jena emphasized that the charges listed in the circular were incidental to the transmission of electricity and thus exempt as clarified within the document itself. He pointed out that a similar clarification had previously been invalidated by the Gujarat High Court in Torrent Power Limited v. Union of India, where the court had ruled against the imposition of GST on related charges.

The revenue’s representative, Mr. Kedia, argued that there was no reason for the court to interfere at this stage, especially since the revenue had filed a Special Leave Petition challenging the Gujarat High Court’s decision. However, the Orissa High Court determined that it would be prudent to stay the show cause notice issued to the petitioner while the matter awaited a decision from the Supreme Court. The court cited the Kusum Ingots and Alloys Ltd. v. Union of India judgment, which established that rulings regarding the constitutionality of parliamentary acts should be applied across India. The court concluded by staying the show cause notice issued on September 25, 2023, and the subsequent demand order from June 13, 2024, until the Supreme Court resolved the ongoing special leave petition concerning the matter.

This ruling by the Orissa High Court effectively pauses any demands for GST on electricity transmission and distribution charges, reinforcing the notion that legal clarifications with nationwide implications must be adhered to while awaiting higher judicial interpretation. The decision highlights ongoing legal complexities surrounding GST applicability in the electricity sector and underscores the significance of judicial precedents in shaping tax obligations.

FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT

1. Mr. Jena, learned advocate appears on behalf of petitioner and submits, his client is a distribution company. Impugned is circular dated 1st March, 2018 issued by Government of India, Ministry of Finance (Department of Revenue), Central Board of Excise and Customs. Under challenge is clarification (1) against query (1) in serial no.4 in the circular. He submits, fees and charges mentioned in clauses (i) to (v) under clarification (1) are incidental to transmission, exempted as clarified by said clarification itself. Hence, the fees and charges under clauses (i) to (v) are also exempted. Pursuant to the clarification demands have been made. There be interference, interim at this stage. This is because the clarification has been struck down by, inter alia, the Gujarat High Court on judgment dated 19^th December, 2018 in Torrent Power Limited v. Union of India available at (2018) SCC OnLine Guj 4808. He submits further, revenue preferred Special Leave Petition to the Supreme Court. There was direction for issuance of notice but no order of stay.

2. Mr. Kedia, learned advocate, Jr. Standing Counsel appears on behalf of revenue. He submits, revenue has filed Special Leave Petition against striking down of the clarification by, inter alia, the Gujarat High Court. Petitioner has just been issued with a show cause notice. There is no reason for interference at this stage.

3. Mr. Das, learned advocate, Additional Standing Counsel appears on behalf of State.

4. We are inclined to pass interim order and adjourn the writ petition sine die awaiting adjudication of the question by the Supreme Court. This is because the Supreme Court did not stay the striking down of the clarification. The struck down clarification has given rise to issuance of show cause notice and acting further on basis of the clarification, there will be demand. Since the show cause notice was issued in respect of the clarification, struck down by the Gujarat High Court, we following judgment of the Supreme Court in Kusum Ingots and Alloys Ltd. v. Union of India, reported in (2004) 6 SCC 254, interpret the striking down to be applicable in this State. Paragraph 22 from Kusum Ingots (supra) is reproduced below.

“22. The court must have the requisite territorial jurisdiction. An order passed on writ petition questioning the constitutionality of a Parliamentary Act, whether interim or final keeping in view the provisions contained in Clause (2) of Article 226 of the Constitution of India, will have effect throughout the territory of India subject of course to the applicability of the Act.”

5. Impugned show cause notice dated 25^th September, 2023 and followed by demand order dated 13^th June, 2024 will remain stayed. The writ petition is adjourned sine die awaiting adjudication by the Supreme Court on the Special Leave Petition pending in said Court, inter alia, against Torrent Power Limited (supra). Liberty to mention.